Tesla Posts Fifth Straight Profit in Q3 with Record Revenue of $8.77 Billion

FXEmpire.com -

Tesla Inc, an American electric vehicle and clean energy company, reported a profit for the fifth consecutive time in the third quarter with record total revenue of $8.77 billion, largely driven by substantial growth in vehicle deliveries as well as growth in other businesses, sending its shares up over 5% in pre-market trading on Thursday.

The manufacturer of high-performance electric vehicles said its total revenue rose about 40% to an all-time high of $8.77 billion, up from $6.30 billion registered a year earlier. That was higher than the market expectations of $8.36 billion.

“Tesla will need to have demand to keep plants utilized but demand continues to not be a problem with third-quarter deliveries up 43.6% to 139,593. Free cash flow for the quarter was solid at about $1.4 billion, up about $1 billion year-over-year, but got help from $397 million in emission credit sales. We calculate Tesla’s pretax income at $158million excluding credit sales,” said David Whiston, sector strategist at Morningstar.

“Still, thanks to the September $5 billion equity offering, Tesla’s second of the year, cash at quarter-end was very strong at $14.5 billion and management guided for 2021 and 2022 capital expenditure to be incrementally higher (we assume from 2020 levels) by $2 billion to $2.5 billion. We don’t see Tesla in a liquidity crisis next year and if it was running short of funds, we think it can easily raise capital. Possible inclusion to the S&P 500 index remains a catalyst to the stock in our opinion, but we do not think it’s a sure thing due to credit sales and Tesla’s small profits for a company with its large market capitalization.”

Excluding items, Tesla registered a profit of 76 cents per share. It reported net income of $331 million, or $874 million excluding stock-based compensation awards given to Musk, Reuters reported.

Tesla said its revenue from the sale of regulatory credits were $397 million and without that the electric car maker would have been difficult to see a profitable quarter.

Tesla shares closed 0.17% higher at $422.64 on Wednesday and rose over 5% in pre-market trading on Thursday. The stock is up over 400% so far this year.

Tesla Stock Price Forecast

Thirty equity analysts forecast the average price in 12 months at $335.54 with a high forecast of $578.00 and a low forecast of $19.00. The average price target represents a -20.61% decrease from the last price of $422.64. From those 30 equity analysts, even rated “Buy”, thirteen rated “Hold” and ten rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $333 with a high of $716 under a bull scenario and $108 under the worst-case scenario. Tesla received a $450 price objective from analysts at Goldman Sachs Group. The firm currently has a “neutral” rating on the electric vehicle producer’s stock.

Several other analysts have also recently commented on the stock. Independent Research reiterated a “sell” rating and set a $114.00 price target on shares of Tesla in September. Citigroup lifted their price target to $117 from $110 and gave the company a “sell” rating. JMP Securities cut Tesla from an “outperform” rating to a “market perform” rating. At last, New Street Research upgraded Tesla from a “neutral” rating to a “buy” rating and set a $578.00 target price.

Analyst Comments

“We are positive on Tesla’s leadership across: EVs, Batteries & FSD and see an opportunity for TSLA to further penetrate these key TAMs. Why not OW? At its current valuation, we believe the market has already discounted a large part of Tesla’s growth potential. Further, competition in the EV market continues to intensify from traditional OEMs, startups & mega-tech firms,” said Adam Jonas, equity analyst at Morgan Stanley.

“We also continue to harbour concerns over the long-term efficacy of an auto business commercializing advanced tech that is economically sensitive within China. As Tesla expands production, they will likely need to raise more capital. While there is a strong appetite in the short-term, it will dilute shareholders in the long run,” Jonas added.

Upside and Downside Risks

Upside: 1) Tesla China profitability surprises to the upside. 2) Europe Giga success. 3) Model Y margin accretion. 4) Software margin accretion. 5) Tesla the Supplier? 6) Cybertruck – highlighted by Morgan Stanley.

Downside: 1) May never make the leap to a shared mobility model, limiting itself to niche OEM status. 2) Execution risk / COVID-19. 3) Openness of capital markets to funding Tesla’s strategic ambitions. 4) Large & better-capitalized technology firms emerging as competitors.

Check out FX Empire’s earnings calendar

This article was originally posted on FX Empire


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.